Critics Target Assessment Cap

ARCH asks if the maximum assessment cap is too high.

In April, when the Reston Association Board of Directors removed the maximum assessment cap from the proposed governing documents, members got an earful from fiscally conservative residents.

The change, these residents argued, was a financial grab for power that eliminated a structural check on spending.

Five months later in September, the board re-instituted a modified cap, hoping it would produce broader support for the proposed documents.

For a while, it seemed any problems concerning the cap had been put to rest.

DURING THE FIRST in a series of district meetings on the governing documents on Saturday, Dec. 3, critics again set their sights on the maximum assessment cap, suggesting that it’s too high and gives RA too much financial discretion.

“Why does the board need such wide discretionary spending authority,” said Frank Pfeilmeier, president of the Alliance of Reston Clusters and Homeowners.

Robin Smyers, who represents the Lake Anne/Tall Oaks district on the board and hosted the meeting at Lake Anne Elementary School, responded by saying that the board has discretion now, yet it has always been responsible in the past.

In an analysis released by ARCH at the meeting, the modified maximum assessment cap increases RA’s “spending authority” to $2.5 million per year over the next 10 years. Pfeilmeier said RA needed to provide justification for the increased authority.

But others disagreed. Robert E. Simon, the founder of Reston, argued that the cap is an artificial constraint most other governing bodies don’t employ, including most other homeowners associations. Simon argued at past meetings to get rid of the cap altogether.

RA President Jennifer Blackwell said that the cap hasn’t historically been considered during the budget process. “Every year, we set the budget based on what the Reston Association needs, regardless of what the maximum assessment is,” said Blackwell.

No one voiced problems with the assessment at public hearings on the biennial budget, which the board passed last month. The board approved a $12 increase for the 2006 annual assessment, from $425 to $437. In 2007, an increase will not occur — the first time the assessment has been flat since 1994.

“What the [revised] cap will do is give the board more flexibility to adapt to unforeseen events,” said Milton Matthews, RA executive vice president and CEO.

Still, a few others maintained that the proposed cap is too high. “Right now we don’t have a cap,” said Vera Hannigan. “This cap you’re proposing is false.”

FOR THE PAST few years, RA board members have agreed that the existing cap will soon be financially unstable. When the modified cap was re-instituted in September, the board agreed to increase the current cap by an initial $69 from $445 to $514, and then adjust it in future years by the lesser of 4 percent or the Employment Cost Index, which has averaged 3.9 percent since 1984. The one-time $69 increase represents a decision in 1991 that rolled the recreation pass fee, which was about $50, into the assessment. The 1984 roll-in instantly reduced the cap margin by $50, which, accounting for inflation, equals about $69 today.

The need to make changes to the existing cap, which is currently $20 above the 2005 assessment of $425, has also been proposed by independent auditors. This year, auditors recommended that the cap be changed to allow for more flexibility.

Over the next several weeks, the Reston Association district representatives on the board will host meetings to promote the documents before they are finalized at a meeting on Jan. 26. “The purpose for these meetings is for us — my community members, my neighbors — to buy into these changes,” said Smyers.

ANOTHER ISSUE THAT grabbed the attention of the district residents was the resale fee, also known as the transfer fee, which is a $250 charge to people who buy a home in Reston. The fee, which will not apply to current Reston residents, will also increase by a percentage of the assessment each year at the discretion of the board, said Matthews.

“This is for our new members who haven’t been contributing in the past,” said Smyers. “We hope that’s going to be a positive change to our bottom line.” The money generated from the resale fee is designated to offset assessments.

But, the resale fee clause says the revenue generated can go toward offsetting the assessment or into reserves, which, according to RA General Counsel Ken Chadwick, indirectly offsets assessments.

Reston resident Mike Freeman suggested that the language clearly states that revenues will only offset assessments. Smyers took note of the suggestion and promised to bring it up at the next board meeting.

Since the board decided to use the revenue to offset assessments in September, the resale fee has been a popular policy change. Yet some residents still aren’t sure the fee is a good idea. “Did you consider that you’re in competition [with other communities], and that someone may choose to buy outside of Reston because of this fee?” said William Nicoson.

Smyers and others at the meeting didn’t think the fee would alter people’s decisions to move into Reston. “When we’re talking about $250 to buy into this community, it’s a bargain, believe me,” said Duane Erickson.

“It makes sense for new members to have some buy-in because they’re benefiting from capital improvements that members have paid for over the years,” said Pfeilmeier.

LATE LAST WEEK, RA discovered a mailing glitch had prevented many Lake Anne/Tall Oaks district residents from receiving invitations for Saturday’s meeting. Despite a good turnout, a second meeting has been scheduled for the district on Jan. 17.

For about three years now, the board has worked to revise the governing documents, which codify the rules and regulations governing the Reston Association. A year ago, the RA hired Bob Diamond, an attorney with Reed Smith LLC, to help the board make revisions to the governing documents, which were last updated in 1984.

In the past year, the board has labored over tough policy decisions, like the elimination and reinstitution of the cap, periodically coming up with revised drafts. A near final version was released in October. The board plans to send the proposed governing documents to referendum for approval in February. From Feb. 13 to March 31, RA members will vote on the revised documents. To pass, the referendum requires 40 percent voter turnout and two-thirds approval. As is customary in a referendum of this type, RA will spend roughly $70,000 to help convince members to support the referendum and generate the required 40 percent voter turnout.